When Welfare Politics Deters Social Enterprise Growth

Can social enterprise thrive in tackling poverty when extensive state welfare programs already exist? I believe this will be one of the key challenges to grapple with when it comes to setting up social enterprises in developing regions that still pose plenty creative opportunities to work with the poor other than severely-impoverished developing regions without the resources for welfare programs. Although both welfare and enterprise approach aim at tackling poverty but their contrasting approach and principles could not have been starker.

It may require substantial research to identify complementary role and creative gap for social enterprises to fill, but the challenge becomes a major political obstacle when extensive state welfare programs are unaccounted for key outcomes and turned into political leverage to win electoral votes. One particular developing country that I study on UN report actually allocates substantial resources to provide subsidized microloans to poor women entrepreneurs by setting up government affiliated micro-financing institutions modeled after Grameen Bank. But sadly they largely turn into ‘handout’ institutions with questionable agenda and poor track record. Loans have been distributed to same groups of entrepreneurs to pay off rounds of debts rather than spending on expansion of original enterprise mission. They never actually progress from microloan programs and therefore deserving people in hardcore poverty never get loan access. Such microloan programs not only lack oversight but are prone to abuse, as evidenced by limited anecdotal success and missing documented overall social impact.

Not surprisingly, there is not a single for-profit social enterprise run by individual entrepreneurs in the country concerned despite evidence of greater need of entrepreneurship to tackle poverty. Under such condition, is it conducive to set up social enterprises? What is the appropriate strategy? There will be tremendous challenge to battle against vested political interests and suspicion toward the approval of allowing social enterprises to thrive when it directly reflects the incompetence of elected politicians and bureaucrats in tackling poverty despite substantial resources that they possess. Why would they want to compromise their political leverage?

The second challenge arising from the first is undoubtedly the most difficult for aspiring social entrepreneurs: That is to convince the poor to gradually move away from handout and to take a riskier but more sustainable entrepreneurial path instead, when they have long been molded into handout mentality and relying on government assistance to get by with a small number of them actually thrive. The shift of mindset will be hard to trigger after years of misguided policies with vested political interests to confine the poor to their comfort zone and remind them this is as good as it gets.

Frankly, I have a lot more questions than answers and I believe that I will come to grapple with these thorny issues sooner than I think as I move beyond the research stage to attempt setting up a social enterprise.